Controversial plans to replace job centres with private services to get benefit claimants into work will be piloted in Birmingham and Solihull.

Welfare secretary James Purnell chose the city as one of the areas to take part in a new, tough regime to help single mothers, incapacity benefit claimants and the unemployed find work.

Businesses, charities and voluntary bodies will be offered the opportunity to take over the role of state-run services such as Jobcentre Plus. They will be rewarded for cutting the number of claimants with a share of the cash previously paid out in benefits.

But critics, including trade unions Unison and PCS and Labour MPs, claim it amounts to “privatising” job centres, and new services will be motivated by profit. Compass, the left-wing pressure group, warned businesses would focus resources on helping the easiest claimants get into work.

It said in a statement: “We are particularly concerned about the very real possibility of parking and creaming – namely the company will park the most difficult cases, leaving them to struggle and cream the easier ones off the top.”

The government is piloting the scheme in five areas, including the West Midlands. Birmingham, Solihull and parts of the Black Country and Coventry will be included.

There are 58,830 incapacity benefit claimants in Birmingham and Solihull. Another 39,014 people claim Jobseeker’s Allowance and 23,770 single parents are on income support. Under the government’s plans, almost everyone except those with severe disabilities will have to prove they are looking for a job or preparing to enter the workforce, for example by taking part in training, for benefits.

Anyone on Jobseekers Allowance or Employment and Support Allowance – the replacement for Incapacity Benefit – will have benefits cut if they turn down job offers or miss interviews.

Single parents with children aged between one and seven have to start preparing for work. If they are not working when their child is seven, they will be moved off income support and onto Jobseekers Allowance.

Conservatives have said they will back the proposals, ensuring they will get through the Commons even if opposed by Labour MPs.

Welfare secretary James Purnell said the West Midlands was already working closely with government to find new ways of getting people into work.

“We have worked very closely with Birmingham and the West Midlands on devolving power to local agencies to deal with unemployment,” he said.

The private and voluntary sector would be able to raise funds to pay for schemes to get people into work, he added.

“Services are delivered by the voluntary and private sector and the idea is they invest in helping people up-front, rather than getting into a situation where people are out of work and there are not enough resources to get them into work.”

The worst of the recession would be over before the scheme was active, Mr Purnell said. “The specific pilot in Birmingham, Solihull and the West Midlands won’t be up and running for 18 months or longer.”